Employee Tax Incentives

Employee Tax Incentives

Staff are the heart of all care businesses but in tough times is there a way to retain staff while cutting the cost to the business? There are a number of things that may incentivise your staff, which HM Revenue & Customs recognise and are tax efficient.

An additional expense deduction of £12 per annum is available, for the same group of employees, who are required to wear a prescribed style of shoe in their workplace. £6 per annum is also available for those who are required to wear prescribed stockings or socks.

The expense deductions can be added to the employees’ PAYE codes so that the tax and National Insurance saving can be made each month. We have clients who administer claims for employees at the end of each tax year in an attempt to help staff retention.

Mileage claims can add up

Directors and employees can claim a tax free amount of 45p per mile on business mileage on the first 10,000 qualifying business miles and 25p thereafter, when using their own cars and vans for work.

Such mileage can include travel between different locations within a company (or group of companies), provided that the employer allows this within its expenses policy.

Please note that travel between home and your normal place of work does not constitute business travel.

Should the employer reimburse the employee at a rate of less than 45p/25p, then the employee can claim tax relief on the difference. This is a great way of getting some more cash to the employee and as with Flat rate expenses above, you could help with staff retention and offer to do the claim for them, if they are an employee after the year end!

Use of home as office

Employees could claim a tax free amount of £4 per week for ‘use of home as office’, provided there arrangements are in place for the employee to regularly work from home and costs incurred as a result – there is no need to keep detailed records of the costs incurred.

Employees have scope to claim tax relief on costs in excess of £4 per week, however any such costs would need to be justifiable and comply with HMRC guidelines.

It might be a small sum, but these sums mount up over the years!

Long service awards

For many years it has been possible to reward a long serving employee (more than 20 years service) with a gift up to the value of £50 per year of service and provided that certain conditions are met, it is tax free in the employee’s hands and tax deductible in the company’s accounts.

There is no exclusion for directors in the legislation, although it would be sensible for a small salary to be in place otherwise it may be difficult to argue employment status.

The gift cannot be cash or something that is easily convertible to cash (such as vouchers). So if you have been a director for more than 20 years, maybe it is time for that new set of golf clubs or flat screen TV! An easy win for the owner of a business!

Structural incentives

We have focussed on simple opportunities which are easy to implement. There are a number of other, structural, options available. Whilst tried and tested, these are more complicated and as a result we have not attempted to cover them in this article, but if you wish to discuss any of these further, please contact us.